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Thursday, 29 September 2016 15:34

Federal Reversion Clauses and Federal Grant Assurances and their effect on non-aviation tenants at airports

Written by Richard L. Richards, Florida Board Certified Aviation Attorney
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Can the Federal Government really take back my leasehold?

There are public airports in Florida subject to federal reversion clauses and federal grant assurances. These reversion clauses and grant assurances have seemingly not curbed development as there are significant non-aviation tenancies at Florida airports.

I. Surplus Property Act of 1944 (Federal Reversion Clauses)

a. Introduction

Numerous Florida airports were originally developed as part of the war effort during the Second World War. Shortly after the war, the federal government disposed of hundreds of airports, pursuant to the Surplus Property Act of 1944. These airports were transferred by deed to local governments. The Surplus Property Act of 1944, as amended in 1947, not only authorized, but also prescribed the terms of the deed by which the federal government transferred an airport to a local government. The deeds are required to state that the transfer was occasioned by the “UNITED STATES OF AMERICA, acting by and through the War Assets Administration, under and pursuant to...the powers and authority contained in the provisions of the Surplus Property Act of 1944, as amended, and applicable rules, regulations [,] and orders...”. The 1947 Amendments to the Act established the following two preconditions for transfer of property to a local government for use as a public airport: (1) the transfer had to be “subject to the terms, conditions, reservations, and restrictions” contained in the Act; and (2) the property interest conveyed had to be “essential, suitable, or desirable for the development, improvement, operation, or maintenance of a public airport ... [,] or reasonably necessary to fulfill the immediate and foreseeable future requirements of the grantee for the development, improvement, operation, or maintenance of a public airport, including property needed to develop sources of revenue....” Act of July 30, 1947, Pub.L. No. 80–289, § 13(g)(1), as reprinted in 1947 U.S. Code Congressional Service 673, 673–75.

b. Reversion Clauses

All deeds conveyed to the Surplus Property Act are subject to certain reservations and restrictions in favor of the United States, including that the deeds conveying the airport property. Each deed contains is required to contain the following relevant provisions: First, the grantee, “for itself, its successors and assigns,” agrees to abide by certain restrictions imposed by the Surplus Property Act of 1944 that run with the land. To ensure enforcement of the provisions, the each deed states that upon a breach of any of the aforesaid reservations or restrictions by the [local government] ... whether caused by the legal inability of [local government] to perform any of the obligations herein set out ... or otherwise, the title, right of possession[,] and all other rights transferred to the [local government], or any portion thereof, shall at the option of the [United States] revert to the [United States] upon demand made in writing by the War Assets Administration or its successor Government agency at least sixty (60) days prior to the date fixed for the reverting of such title. Act of July 30, 1947, Pub.L. No. 80–289, § 13(g)(1), as reprinted in 1947 U.S. Code Congressional Service 673, 673–75

c. Discussion

This reversion clause applies to many general aviation airports in Florida including the Boca Raton Airport. Non-aviation tenants have analyzed the risk of such a reversion and the risk appears to be minimal to none. The trend is that airports (and general aviation) are growing as evidenced by serious development of fixedbased operators and hangars.

II. Federal Grant Assurances

a. Introduction

The Federal Aviation Administration provides monetary grants to “airport sponsors,” or public agencies that own and operate airports, through the FAA’s Airport Improvement Program, authorized under the Airport and Airway Improvement Act of 1982 (“AAIA”), 49 U.S.C. § 47101 et seq. Congress has required that grant applications contain certain written assurances that an airport sponsor seeking federal funds will abide by a variety of requirements. 49 U.S.C. § 47107(a). Under the AAIA, the Secretary of Transportation is responsible for ensuring compliance with these assurances, 49 U.S.C. § 47107(g), and is authorized to approve grant applications only if the airport sponsor’s assurances are “satisfactory to the Secretary.” 49 U.S.C. § 47107(a). Accordingly, the Secretary of Transportation has promulgated and revised a set of standardized grant assurances (“Grant Assurances”), including the three at issue in this case.

b. Grant Assurances

The major Grant Assurances which relate to non-aviation tenancies include:

Grant Assurance 22, entitled “Economic Nondiscrimination”. This grant assurance requires the airport sponsor to make the airport available as an airport for public use on reasonable terms and without unjust discrimination to all types, kinds, and classes of aeronautical activities, including commercial aeronautical activities offering services to the public at the airport.” 64 Fed.Reg. 45,008, 45,011 (Aug. 18, 1999); 62 Fed.Reg. 29,761, 29,766 (June 2, 1997);

Grant Assurance 23, entitled “Exclusive Rights,” requires the airport sponsor to assure that “[i]t will permit no exclusive right for the use of the airport by any person providing, or intending to provide, aeronautical services to the public.” Further, the airport sponsor must agree that “it will not, either directly or indirectly, grant or permit any person, firm, or corporation, the exclusive right at the airport to conduct any aeronautical activities.”

Grant Assurance 24, entitled “Fee and Rental Structure,” requires an airport sponsor to assure that it “will maintain a fee and rental structure for the facilities and services at the airport which will make the airport as self-sustaining as possible under the circumstances existing at the particular airport, taking into account such factors as the volume of traffic and economy of collection.” 62 Fed.Reg. at 29,767.

c. Discussion

The FAA grant assurances affect non-aviation tenants at every public airport in Florida. In fact, the public airports would likely not be able to afford improvements without the FAA grants for infrastructure (such as runway repaving, control towers, and lighting). Grant Assurance 22 affects potential non-aviation tenants by requiring the airport to lease land at fair market value. As such, airport leases will typically have periodic re-appraisals to ensure that the lease rates are market rate. Grant Assurance 23 affects potential non-aviation tenants. It is specifically intended to prevent “land banking”; meaning that the land cannot be leased and then not used (i.e. the grant assurance prevents speculation). Grant Assurance 24 places an additional burden on the airport to make the airport self-sustaining. This actually benefits non-aviation tenants in that some airports have land which will likely never have an aviation use, but the airport can become more self-sustaining by leasing to non-aviation tenants.

III. Non-Aviation Tenants at Florida Airports

a. Introduction

There are public airports in Florida which have non-aviation tenants. Some of these airports are subject to the reversion clauses and grant assurances as described above.

b. Boca Raton Airport

The Boca Raton Airport is publicly-owned by the State of Florida and is designated as a general aviation transport facility. It is located in Boca Raton off of Interstate 95 between Spanish River Boulevard and Glades Road. The airport serves the corporate, recreational, and flight training needs of the community. During World War II, the airport served as a military training base with 100 planes regularly assigned to the field, including B-17 and B-29 bombers. In 1948, control of the Boca Raton Airport was transferred through a quitclaim deed from the United States of America, by and through the War Assets Administration, to the Town of Boca Raton. The Airport is now governed by a seven-member board (five members appointed by the Boca Raton City Council and two appointed by the Palm Beach County Commission). Considering its location near I-95, the airport land is attractive to several non-aviation tenants, including Cinemark Palace 20 and XD, Boomers, and City Furniture. The Boca Raton Airport is subject to Federal reversion and FAA grant assurances.

c. Page Field

Page Field is general aviation airport in Fort Myers, Florida off of US 41 south of Colonial Drive. This airport is close to the communities of Fort Myers, Cape Coral, Sanibel & Captiva, Estero, Bonita Springs, Pine Island, and others. Page Field are owned and operated by the Lee County Port Authority (The Lee County Port Authority is governed by the Lee County Board of County Commissioners, sitting as the Board of Port Commissioners. The term of each Port Commissioner coincides with their regular term of office as a County Commissioner). Page Field has several non-aviation tenants including Toys “R” Us, Old Navy, Best Buy, Michael’s, Office Depot, and PetSmart. Page Field is subject to FAA grant assurances – however it is not subject to a Federal reversion clause (Page Field was an Army airfield during World War II – but it was leased from Ft. Meyers during the war and was not owned by the Federal Government).

IV. General Discussion

The Federal reversion clauses and the FAA grant assurances certainly require analysis with respect to any non-aviation tenancy at an airport. However, as demonstrated by non-aviation tenants at airports, the Federal reversion clauses and the FAA grant assurances are not in and of themselves impediments to non-aviation tenants at Florida airports.

Richard L. Richards, Esq. is a Florida aviation attorney who is board certified by the Florida Bar in Aviation law. Mr. Richards’ is a partner in the firm of Richards Goldstein LLP whose representative clients include FBO’s, aircraft owners, aircraft dealers, lessors/lessees, aircraft fuel providers, and aircraft/engine repair stations in all aspects of aviation law including leases, sales contracts, liens, and lawsuits. Mr. Richards has over 22 years of experience in aviation law including private practice, general counsel for an airline, and airport counsel for an airport authority. Mr. Richards also serves as a board member and Vice President of the Florida Aviation Business Association.

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